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Monetary Union, Trade Integration, and Business Cycles in 19th Europe

Author

Listed:
  • Marc Flandreau

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Mathilde Maurel

    (ROSES - Réformes et Ouverture des Systèmes Economiques post-Socialistes - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper studies the impact of monetary arrangements on trade integration and business cycle correlation in late 19th century Europe. We estimate a gravity model and show that tighter monetary integration was associated with substantially higher trade, as in recent studies using contemporary data. For instance, the Austro-Hungarian monetary union improved trade between member states by a factor of 3. To explain this, we build and estimate a simple model where greater monetary integration weakens the current account constraint by fostering business cycle co-movements.

Suggested Citation

  • Marc Flandreau & Mathilde Maurel, 2005. "Monetary Union, Trade Integration, and Business Cycles in 19th Europe," SciencePo Working papers Main halshs-00308756, HAL.
    • Handle: RePEc:hal:spmain:halshs-00308756
    DOI: 10.1007/s11079-005-5872-4
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00308756
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